Newspaper column: Lawsuit challenges practice of state gifts to private companies

Earlier this month the Nevada Supreme Court heard arguments on procedural matters in a case that seeks to have declared unconstitutional the state’s practice of handing out gifts to businesses that agree to operate in Nevada and create jobs.

The plaintiff in the case is Michael Little, owner of a company that converts recycled landscape trimmings into biomass, a renewable energy source. The suit grew out of the fact the Governor’s Office of Economic Development (GOED) gave $1.2 million to one of his competitors, SolarCity, a company that installs solar panels. That was part of a $10 million Catalyst Fund.

Plaintiff Michael Little

The suit claims the gift to SolarCity violates the Gift Clause of the state Constitution, which prohibits the state donating or loaning money to any company. Little is represented by Center for Justice and Constitutional Litigation (CJCL), a division of the Nevada Policy Research Institute.

Joseph Becker, chief legal officer and director of the CJCL, said he is pleased the state Supreme Court agreed to hear arguments on whether Little has “standing” as a taxpayer to pursue the lawsuit.

“It seemed to me the court was very sympathetic to our plight, and that is that absent taxpayer standing it’s very difficult to keep a state government within its constitutional constraints,” Becker said in a recent interview. “Forty-six states have at least some form of taxpayer standing, three explicitly have rejected taxpayer standing, and one state, up until now, has no taxpayer standing jurisprudence whatsoever, according to legal scholars, and that state, of course, is the very one in which we find ourselves. Given the nature of the questions, I’m optimistic that they see this as problem and they’re willing to address it.”

A ruling giving Little standing as a taxpayer would send the case back to district court to be heard on its merits.

Becker explained that CJCL is in the business of trying to set precedent that serves the public interest, and having the Supreme Court say a taxpayer has standing to challenge unconstitutional tax expenditures is very important.

The Supreme Court hearing gave Becker the chance to point out to the court the fact that the voters have on three occasions rejected attempts to amend the state Constitution and remove the Gift Clause — in 1992, 1996 and again in 2000 by wide majorities.

Gift clauses started appearing in state constitutions in the mid-1800s after state governments in the East invested heavily in private companies building infrastructure such as canals and railroads that went bust. The states of Indiana, Illinois and Michigan were bankrupted as a result.

The Nevada Constitution specifically states: “The State shall not donate or loan money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.”

“We needed a vote of the people to change the Constitution, which never happened, but now suddenly its OK for the state to do something that up until now, even they insisted, would take a constitutional amendment,” Becker said bemusedly. “I tried to make that point and I think did,” noting the justices asked for citations about the balloting.

Becker also noted the very timeliness of the case in light of the fact SolarCity, after drawing $400,000 of its allocated $1.2 million, announced just before Christmas that it is ceasing new operations in Nevada and laying off 550 employees after the state Public Utilities Commission drastically increased the connection fees for solar panel owners and slashed the amount paid for solar power uploaded to the grid.

Becker noted his organization has been arguing all along that the reason these Gift Clause provisions were put in Western constitutions is because of the experience of those bankrupted Eastern states, where taxpayers found themselves having to bail out government spending boondoggles that benefited some private party that was somehow friendly with the people in office.

“I pointed out to the court that this is exactly the kind of problem that this provision was intended to prevent and the voters didn’t want that changed,” the attorney said. “It is the court’s job to protect against the tyranny of the majority, but here we’re protecting against the power elite.”

Pure cronyism.

A version of this column appears this week in the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel, the Lincoln County Record and the Sparks Tribune — and the Elko Daily Free Press.

 

Crony socialism is now all right with them

Methinks the editorial position of the Las Vegas newspaper bent to the left this morning.

Under the headline, “State stepping up for autonomous cars,” the editorial in this morning’s Review-Journal applauded Republican Gov. Brian Sandoval for deciding to appoint an autonomous car expert to the Governor’s Office of Economic Development (GOED) — “a person whose job it will be to meet with companies looking to develop the industry and convince them Nevada is the place to do it.”

The editorial went on to applaud the governor for shelling out tax money and/or tax credits and abatements to attract companies such as Apple Computer, Switch, Tesla and Faraday Future, all described as big players in the information and energy economy.

“Gov. Sandoval’s competitive streak — and his vision for economic development — is but one reason Nevada has an advantage over other states when it comes to the new industry of driverless cars,” the editorial gushes with enthusiasm and calls for more of the same. “The state’s higher education system needs to match that vision with a competitive job-training program of its own, tailored specifically to the needs of the companies that will set up shop here.”

It seems like only yesterday, well, two years ago, the same editorial page was bemoaning such largesse under the headline, “Subsidized jobs,” noting that some of the deals GOED was cutting amounted to between $5,000 and $55,000 per job.

That editorial ended thusly:

Even at the levels handed out last month, the public simply can’t afford to subsidize its way to full employment. And it’s absolutely brutal to ask local businesses, who have invested in this community and sacrificed to keep their doors open, to pay full freight for themselves so newcomers — and potential competitors — can enter the market at a discount.

Nevada needs jobs, and the Barclaycard US and CITRA plans will help. But having Nevada governments pick winners isn’t a long-term employment solution. Our officials should be just as focused on doing whatever it takes to ensure existing companies can stay in business and grow. Let’s find a way to give them a break.

If a Republican governor and a Republican majority Legislature — meeting twice in special sessions — can embrace such crony socialism, so can a once-staunchly libertarian editorial page.

Evolution rewards the survival of the fittest.

Then there is the survival of those who just fit in.

Photo of Gov. Brian Sandoval accompanying the online version of today’s Review-Journal editorial. (R-J photo)

 

Newspaper column: Courts should put a stop to governor’s corporate welfare program

The attorney for the legal arm of a libertarian-leaning Nevada think tank this past week asked the state district court in Carson City to issue a summary judgment that would essentially put the Governor’s Office of Economic Development (GOED) out of business.

The GOED was created as a way to dispense public tax money from a $10 million Catalyst Fund to companies in hopes of creating new jobs and jumpstarting the recession-retarded economy.

The request for summary judgment grows out of a lawsuit filed earlier this year by the Nevada Policy Research Institute’s Center for Justice and Constitutional Litigation (CJCL) on behalf of Michael Little, a Nevada alternative-energy entrepreneur and a taxpayer, because the GOED planned to give $1.2 million to one of his competitors, SolarCity, a company owned by a billionaire that installs solar panels.

Little owns Landfill Alternative, a company that converts recycled landscape trimmings into biomass.

Michael Little at his biomass business.

The suit claims the gift to SolarCity violates the Gift Clause of the state Constitution, which prohibits the state donating or loaning money to any company.

In a deposition given in the court case, GOED’s Executive Director Steven Hill admitted that the state giving money directly to a company would violate the Constitution, so instead the money is funneled through the various county governments.

Sounds like the very definition of a money laundering scheme — a third-party is used to obscure the transfer of illicit funds from the source to its destination.

In the recent court filing, Joseph Becker, chief legal officer and director of the CJCL, points out the state has three times asked the voters of Nevada to amend the Constitution to allow handing out public funds to private companies and each time the amendments soundly defeated.

“This scheme … runs afoul of the plain language of the Nevada State Constitution, the will of the people of Nevada as evidenced by three consecutive four-year elections,” writes Becker, “and, if not held unconstitutional, sets a very dangerous precedent whereby the State, when constitutionally prohibited from acting in certain ways, firsts creates a political subdivision and then subcontracts with that political subdivision to act as an intermediary to do the very thing the Nevada Constitution explicitly prohibits. What next?! Hiring private security companies to conduct warrantless searches in instances where the state would otherwise be constitutionally prohibited?!”

Becker asserts that the case presents no genuine issue of material fact and his client is entitled to judgment as a matter of law because the state “is not entitled to build a case on the gossamer threads of whimsy, speculation, and conjecture” — a reference to case law.

The CJCL motion also quotes at length from an opinion by the Nebraska Supreme Court discussing the constitutional and practical ramifications of that state’s almost identical Gift Clause. The opinion concedes that just about any new factory or retail store might be deemed to benefit a community’s progress and prosperity, but under state law public money cannot be appropriated for private purposes and doing so is self-destructive as well.

“It does not matter what such undertakings may be called or how worthwhile they may appear to be at the passing moment,” the court opines. “The financing of private enterprise by means of public funds is entirely foreign to a proper concept of our constitutional system. Experience has shown that such encroachments will lead inevitably to the ultimate destruction of the private enterprise system.”

In fact, Gift Clauses were enacted in many state constitutions precisely because of the experiences of a number of states during the mid-19th century that loaned public money to private firms for the construction of railroads, canals and other infrastructure only to see the companies go broke and leave the taxpayers holding the debt with no assets to show for it.

“It is an illusion — one that seems to have the persistence of original sin — that prosperity can be attained by taking money from taxpayers and handing it to favored businesses. …” the motion for summary judgment concludes. “The idea of government intervention to influence the composition of a country’s output has long been derided by economists for breeding inefficiency, reducing competition, encouraging lobbying and saddling countries with factories producing products nobody wants.”

As Adam Smith wrote in 1776: “It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people … They are themselves always, and without any exception, the greatest spendthrifts in the society.”

The state should not take from some taxpayers and give to others no matter its motives or methods.

This column ran this week in The Ely Times, the Mesquite Local News and the Elko Daily Free Press.

Throwing your money after your job — as well as giving while taking away

Dignitaries welcome SolarCity to Nevada. (R-J video frame grab)

There was a big ceremony at Town Square as SolarCity — a company that installs rooftop solar panels at homes, businesses and government buildings — opened its new Las Vegas office with the help of a $1.2 million grant from the Governor’s Office of Economic Development. It was in all the papers.

The company says it has hired about 130 employees so far and with plans to double its work force each year.

There was no mention of how of those jobs were cherry picked from the half dozen companies in Las Vegas that already perform the same work and have been paying taxes here for decades.

But Senate Majority Leader Harry Reid, Gov. Brian Sandoval and U.S. Rep. Joe Heck, Assembly Speaker Marilyn Kirkpatrick, Assemblyman David Bobzien and state Sens. Ruben Kihuen, Kelvin Atkinson, Michael Roberson and County Commissioner Steve Sisolak were on hand.

But does the right know what the left hand is doing?

No one mentioned the fact the Public Utilities Commission recently approved an NV Energy plan to slash the state’s solar panel rebates for schools and public buildings to just $1 per watt, according to Patrick McCully, executive director of Black Rock Solar, a company that does solar installations, writing in the Reno Gazette-Journal. Rebates had been as high as $5 per watt for “public buildings” and $4 per watt for homes. Homes and businesses now may qualify for a 30 percent federal solar tax credit.

McCully writes that NV Energy is now proposing rebates be cut to just 8.6 cents per watt. “For the case of a typical-sized solar project at a public school in rural Nevada, it would take about 45 years to pay off the cost of the array,” he writes, without mentioning that the panels typically last about 25 years.

Such cuts, he says, will destroy the financial viability of most installations.

Welcome to Nevada, SolarCity, hold on to your wallet.

Weekly column: Governor’s Office of Economic Development welcomes new workers to take your job

With $10 million in tax money burning a hole their pocket, the Governor’s Office of Economic Development (GOED) awarded funds to several companies planning to move to Nevada and set up shop and, well, compete against those who paid those taxes.

As recounted in this week’s newspaper column, available online at The Ely Times and the Elko Daily Free Press, the money comes from Nevada’s $10 million Catalyst Fund.

The largest handout went to SolarCity. The company installs solar panels at homes, businesses and government agencies. It is getting $1.2 million and says it plans “to initially create more than 100 jobs” by opening an office in Las Vegas.

One wonders whether the employees of Bombard Electric in Las Vegas or Silver State Renewables of Elko or Sierra Solar of Reno or Bristlecone Energy of Ely or the two dozen other companies in Nevada that do the same work appreciate seeing their tax money funneled to a competitor, especially one under investigation.

SolarCity workers install residential rooftop solar panels. (Photo by SolarCity

SolarCity is being investigated by the Treasury Department for possible fraud in obtaining $66 million in grants from the Department of Energy for installing solar panels.

Company founder Elon Musk is a big contributor to Democratic campaigns in general and to President Obama and Sen. Harry Reid in particular. According to one news account, GOED board member Secretary of State Ross Miller fawned, “You had me at Elon Musk,” while voting to award the handout.

Musk’s electronic car company Tesla received a federal loan guarantee for $465 million, but has lost or written off more than $1 billion. Musk’s SpaceX gets $1 billion in NASA funding.

“Musk symbolizes the Obama entrepreneur — someone who relies on government to make their riches as opposed to the marketplace,” the Western Center for Journalism observed. Add Nevada riches to the list.

Yes, here are your tax dollars in action, helping someone else try to take your job.

Read the entire column at the Ely or Elko website.

Local businesses ‘welcome’ new competitors attracted with a big chunk of their tax money during a recession, right?

“Southern Nevada’s economy is welcoming some new businesses,” says the lede on the banner story atop the Business section of today’s Las Vegas Review-Journal.

The story reports that the Governor’s Office of Economic Development approved funding and/or tax incentives for six companies planning to move to Las Vegas and set up shop. The bribe money to attract these businesses comes from Nevada’s $10 million Catalyst Fund, which the attorney general says is constitutional, though the Nevada Constitution states:

Sec: 9.  Gifts or loans of public money to certain corporations prohibited. The State shall not donate or loan money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.

According to its website the Governor’s Office of Economic Development “promotes a robust, diversified and prosperous economy in Nevada, stimulating business expansion and retention, encouraging entrepreneurial enterprise, attracting new business and facilitating community development.”

The news story, with that oh-so-welcoming opening paragraph, reports, “The biggest chunk of change — as much as $1.2 million — would go to SolarCity, a California-based company that provides renewable energy to homeowners, businesses and government agencies. The funding would help SolarCity open a location here.”

From SolarCity website

Let’s just look at this one company for a minute.

I’m sure the two dozen or so companies in Las Vegas that already are in the business of installing solar panels at homes, businesses and government agencies and have been paying taxes for decades to the state and local governments are sincerely welcoming the competitor from California with the $1.2 million grubstake that they helped pay for. You’d think fleeing California would be incentive enough.

I bet all the employees of, say, Bombard Electric — which has been in Las Vegas since 1982, paying taxes and business license fees and complying with all the regulations and restrictions heaped on contractors of every stripe here — welcome SolarCity and the “hundreds of jobs” it will create to compete for contracts to install solar panels.

Maybe Bombard and Sibo and Suntrek and Heliocol West and Solar Unlimited and Green Power Systems should all apply to the governor for a grubstake, too. But they are already here, doing business and paying taxes and competing against each other, what’s the point in helping those suckers.

Maybe the governor would hand me $1.2 million to start up a newspaper to compete with the Review-Journal. I’m sure the paper would be welcoming and appreciative of the economic stimulation their taxes will be generating for Southern Nevada’s economy.

Isn’t it nice that your governor and lawmakers are picking winners and losers for us. I’m sure the bankers and food distributors and metal fabricators all appreciate the new competition being brought to town with their tax money, as the R-J story reports.

One side note, lest the local government agencies are salivating over all the taxes that will be generated by all those solar panel installations, state law exempts solar panels from sales and property taxes.

Solar panels in my backyard, installed by Bombard Electric.